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What Is Liquid Net Worth? Here Is Everything You Need To Know!

Liquidity is a common financial term that indicates how easy it is to convert an asset into cash. Your net worth is another financial term that indicates the total value of all of your financial assets. These assets can include cash, stock investments, bonds, vehicle equity, and property equity. In this article, we’ll talk about your liquid net worth, which has some key differences from your overall net worth. 

A lot of people make crucial mistakes when calculating their liquid net worth. One of the biggest problems is that the terms ‘net worth’ and ‘liquid net worth’ sound very similar, but they have very different meanings. 

Your total net worth factors in financial assets that are not easy to convert to cash. These assets are called non-liquid assets. Non-liquid assets are usually very valuable but are difficult to sell in a timely manner. Examples of non-liquid assets include real estate, vehicles, or retirement accounts. These assets are not part of your net liquid worth. 

hands fanning money

What is Liquid Net Worth?

To calculate your liquid net worth, you’ll start by assessing the cash you have in your bank accounts. Then, you’ll look at the cash equivalents you have in the form of investments. These are considered liquid because they are easy to convert into cash should you need to. 

Then, you’ll need to subtract the total amount of money you owe from this total of cash and cash equivalents. All of your existing liabilities are factored into your liquid net worth. 

Once you’ve subtracted your liabilities from your cash-equivalent assets, you’ll have your liquid net worth. Every person will have a slightly different calculation because everyone has a different combination of assets and liabilities to factor in. 

Calculating Liquid Net Worth

Let’s take a look at a simple example. We’ll break down the calculation process even further later in this article. Say you have $150,000 total in your checking and savings accounts combined. You also have $25,000 in a brokerage account that is invested in the stock market. 

In non-liquid assets, you own a house valued at $400,000, and you have $100,000 left of your mortgage to pay off. You also have $5,000 in credit card debt and $30,000 in student debt. 

When adding up your liquid net worth, you would start by adding up the amount in your bank accounts and brokerage accounts, totaling $175,000. You wouldn’t count your house in this calculation, because it is not liquid. However, you would still include your mortgage payment as part of your liabilities. 

In this case, you would subtract $135,000 from your cash equivalent assets of $175,000. This means you would have a liquid net worth of $40,000. 

Calculating your liquid net worth only gets more complicated the more assets you have. We’ll take a look at a more complicated calculation later on that factors in retirement accounts and other non-liquid assets. 

Knowing your liquid net worth can help you have a better understanding of your financial situation. You’ll have a concrete picture of how much money you realistically have accessible to you. 

Calculator and notebook

What’s Included in Liquid Net Worth?

When calculating liquid net worth, many people aren’t sure which assets to include and which to leave out. Some experts disagree over what to include in a liquid net worth calculation. 

This is because liquidity is somewhat subjective. Liquid assets are ones that can be converted into cash quickly. However, the amount of time it takes to convert an asset into cash can vary depending on the specific situation. 

Cash Equivalents

Of course, your net worth is going to include any money you have readily accessible in checking and savings accounts. It also includes money you have in the stock market in a brokerage account, because you can typically sell these stocks very quickly. 

Some people include retirement accounts, such as 401(k)s or IRAs, as part of liquid net worth. However, many people do not. This is because retirement accounts usually have very strict rules about when you can withdraw money. 

Retirement accounts usually charge penalties if you start withdrawing before a certain age. Additionally, withdrawing from a retirement account can be tricky and time-consuming. The process requires a few extra steps beyond just transferring money from one account to another. 

If you did want to include your retirement accounts as part of your liquid net worth, you would need to subtract the penalty costs associated with an early withdrawal. In this article, we will be including retirement accounts as part of total net worth calculations. 

Fixed Assets

Fixed assets are not included in your liquid net worth calculation. Two of the biggest examples of fixed assets are real estate properties and vehicles. 

The reason these fixed assets are not included in your liquid net worth calculation is because they take a lot of time and effort to sell. Additionally, their value can depreciate over time. It can be difficult to accurately calculate your home or your car’s current value without consulting an industry expert. 

You might be wondering if you can count other valuables as part of liquid net worth, such as jewelry, collectibles, or art. While these items may be slightly easier to sell quickly, they are still not included as part of your liquid net worth. This is because their value can fluctuate over time. 


When you calculate your liquid net worth, you won’t include all your assets – but you will include all your liabilities. This means you’ll include things like mortgages and car payments as well as credit card debt, student debt, and any other debt you may be carrying. 

It may seem strange to include mortgages and car payments in the calculation without including the value of your home or car. However, the logic is that you’ll still owe that amount of money, even if the value of those fixed assets changes. 

Why is Liquid Net Worth Useful?

The economy is always changing, and it can be extremely helpful to have a deep understanding of your finances. Even if you feel financially stable, you never know when you might have an unexpected expense or lose a source of income. 

Understanding your liquid net worth is one way of getting a clearer picture of your total assets. It is incredibly helpful to know your liquid net worth in a financial emergency. If you know how much cash you have readily available, you may not need to go into debt to cover an unexpected expense. 

Knowing your liquid net worth can also be very helpful before making any major financial decisions. For example, if you’re switching careers or making a major purchase, it can be comforting to know how much money you have readily available. 

If you’re young and don’t have many assets yet, your liquid net worth isn’t likely to be a complex calculation, and you might already know it off the top of your head. However, for people who have multiple investments, own property, or have more debts, this calculation could be a bit more difficult. It’s worth taking some time to figure out this important component of your finances. 

filling out budget on a computer

How to Calculate Liquid Net Worth

Let’s take a look at a more complex liquid net worth calculation. Let’s start by adding up cash and cash equivalents in this hypothetical scenario.

  • Cash in checking or savings accounts: $150,000
  • Stocks, bonds, and other securities in brokerage accounts: $100,000
  • Retirement accounts (401k, IRA, etc.): $250,000

This adds up to $500,000. Now, it’s time to start subtracting liabilities. 

  • Remaining mortgage payments: $100,000
  • Remaining car payments: $25,000
  • Credit card debt: $5,000
  • Student loan debt: $20,000
  • 10 percent penalties for early withdrawal on retirement accounts: $25,000

In this scenario, liabilities would add up to $175,000. After subtracting liabilities from total cash equivalents, your liquid net worth would be $325,000. 

This example uses an individual who already has a significant amount of money in savings as well as several investments. It’s very common for people who don’t have established investments or savings accounts to have a negative liquid net worth. 

Once you know what your liquid net worth is, you can make more informed financial decisions. Hopefully, you’ll feel confident in your financial stability. You can also use your liquid net worth as motivation to set new financial and investment goals. 

Liquid Net Worth: Final Thoughts

There are so many people that don’t truly understand their financial situations. They end up caught off guard in financial emergencies because they don’t know how much money they truly have. One way to successfully gauge your economic health is to calculate your liquid net worth. 

Of course, you won’t want to sell off your investments unless you absolutely have to. However, it may end up being the only option in a dire financial situation. 

Your liquid net worth will change over time as you make purchases, invest, and save. It’s worth taking a little bit of time to re-calculate your liquid net worth and your total net worth every few years. 

If you have multiple sources of debt that are weighing down your liquid net worth, it’s important to take steps to alleviate them. While it’s normal to carry some amount of debt throughout your lifetime, you should always have a plan in place to pay it down. 

While the idea of liquid net worth may seem a little confusing at first, it actually isn’t too difficult to calculate. You might hear this term often as you plan for your financial future.


Sarah Foley is a freelance content writer based in Chicago. She covers finance as well as real estate, technology, pop culture, and more.